Deposit Insurance : Actual and Good Practices

In most countries, banks are the most important financial institutions for intermediating between savers and borrowers. They can however be vulnerable and the demise of one bank, if handled poorly, can spill over to others, causing general problems for the banking system. For these reasons, many governments provide a safety net for banks that generally includes deposit protection and lender-of-last-resort facilities, in addition to a system of bank regulation and supervision. Because of the emergence of transition economies in Central and Eastern Europe there has been a need for advice on the introduction of deposit insurance. This paper surveys the systems used in member countries and identifies good practice.